Malaysian construction firm Bina Puri Holdings Bhd expects a minimal internal rate of return of 20% for the 28-year concession of the Karachi-Hyderabad Motorway (M-9) in Pakistan, according to the company’s Executive Director Matthew Tee, reported by the financial and investment weekly The Edge Malaysia. The high costs of borrowing in Pakistan are being attributed to this demand.
Bina Puri had received a letter of intent in November from the Pakistani National Highway Authority (NHA) for the expansion of the four-lane Karachi-Hyderabad highway, to a six-lane motorway on a build, operate and transfer basis. The proposed M-9 motorway will cost an estimated Rs18.2 billion, according to Tee.
Apart from the construction job, Bina Puri is slated to get a 28-year ‘concession’, a form of exclusive contract, for collection of tolls on the motorway.
“We are currently negotiating financial and legal aspects of the concession agreement with them. We will make further announcement on the progress of the concession,” the company said in a statement.
“M-9 is the most lucrative highway in Pakistan, with around 23,000 vehicles using it every day,” he said.
The political climate in Pakistan is not particularly conducive to foreign investments, but the contract, if granted, will ensure a stable return on services rendered for the Bina Puri company. The company has previously been involved in residential and industrial projects in Lahore.
According to Tee, “All this while, Pakistani authorities have been honouring their commitment to us, so we are quite confident and comfortable working with them”.
Published in The Express Tribune, January 18th, 2012.
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